BPCL Singapore market debut raises $500 mn

At a time when rating agencies such as Standard & Poor’s are reiterating their negative outlook for India, government-owned Bharat Petroleum Corporation Limited (BPCL) has made a debut in the bond market abroad, with 15 times subscription at a competitive coupon rate of 4.6 per cent.

The $500-million bond issue, which did not have an overallotment option, will fund capital expenditures for BPCL's ongoing and future domestic projects. The 10-year bonds were listed at the Singapore Stock Exchange yesterday. With this, the company has entered the league of Reliance Industries Ltd, Indian Oil Corporation and NTPC, listed on the Singapore bourse.

According to a company release, the transaction priced at a spread of 2.9 per cent a year over the 10-year US Treasury note, the tight end of revised price guidance. The notes will bear a fixed interest coupon of 4.6 per cent per annum, with interest payable semi-annually in arrears.

“The issue was oversubscribed by almost 15 times, which is the highest oversubscription for any USD bond out of the country. The order book totaled to $7.5 billion from 325 high-quality fixed-income investors. Besides, the benchmark issuance priced at the lowest spread vs. US Treasury amongst all 10-year bond issuances out of India in 2012,” said the company release.

The heavily oversubscribed order book enabled the price guidance to be revised by 30 basis points. This is the highest spread contraction achieved by an Indian issuer in 2012.

In terms of geographic distribution, the Notes were distributed 73 per cent to Asia and 27 per cent to Europe. By investor type, the Notes were distributed 62 per cent to fund managers, 14 per cent to private banks, 10 per cent to banks, and 12 per cent to insurance companies and corporates.

BPCL, the county’s second largest oil marketing company (OMC), and third largest Indian company by turnover, conducted roadshows for three days from Monday.

Another OMC, Indian Oil, has gone for bond issue thrice since 2010 with the latest one earlier this year being denominated in Singapore dollar. Its US dollar issue last year had a coupon rate of around 5.625 per cent.

Government-controlled OMCs have been one of the major concerns for rating agencies due to the mounting subsidy burden, but after the Rs 5 hike in diesel price and capping of subsidised domestic LPG, market perception has improved.

According to a treasury manager in one of the companies which raised money through bond issue recently, investors don’t go by sovereign ratings. “They have faith in India as an emerging market where the oil and gas sector will grow,” he said.